One of the main problems facing the small entrepreneur today is funding. The big banks dislike risk and usually insist on a minimum of 3 for 1 equity ratio to guarantee a loan. Meaning you need to have at least $3 in security for every $1 you borrow. Usually as an assignment on your monthly receivables. besides the above assignment, banks will also take a collateral mortgage on your home, an encumbrance on your inventory and business assets, and, just as additional security, your personal guarantee. Despite all of the grandiose media advertising and promotions, the banks are really not always on your side.
This is not to say that there are not some bank branch managers out there who will do their level best to help you out. There are, but not too many. In any event, despite the local branch manager’s desire to encourage customer support and try to give you the help you need, in many cases, it is outside of his or her purview to grant that loan. It is a decision often made by someone at head office abiding strictly by the rules with no room for discretion in the granting of a loan. Usually this latter has never met you and knows nothing or very little about you or your business.
Banks always talk about the importance of relationships in their promotional material, but for the most part, that’s all it is – talk!
As someone who has experienced difficulties at the hands of inflexible banking personnel over the past more than thirty years, I know what it means to have your entire business hanging by a thread while waiting for ‘head office’ to approve your loan/line of credit. Even with supporting collateral of receivables (at a ratio of 4:1) personal properties (a further 10:1) and a personal indemnity, the banks would often delay, putting payables and payroll commitments in jeopardy. No the banks are not always on your side!
It’s not unusual for businesses to get into a tight situation and find they cannot get assistance from their financial institution. So paradoxically, in light of the above, the best time to put your credit lines in place is when you don’t need them; going cap in hand when times are tough and you need financial assistance is the worst time, Best of Luck!!
Ironically, small business is the largest business segment in this country with the least amount of assistance from banks or any level of government. How shortsighted is that? In fact, according to Statistics Canada, Micro businesses (1-4 employees) accounted for some 610,178 locations. Small Businesses (5-19 employees) 357,802, for a total number of small business locations of 967,980 in both the manufacturing and service sectors.
Small businesses lack access to funding for growth. Year after year, small business owners have listed access to funding as one of their most formidable concerns facing the future of their businesses. While it’s not the government’s responsibility to gift businesses with success, or even to create jobs, it is the their responsibility to make sure that innovative, growing businesses have access to capital as well as adequate infrastructure to accelerate their growth.
So how does a small retail business/ restaurant access capital in times of need? The answer is a Merchant Capital Advance.
If your business has been open for at least a year, has at least one year left on the lease of your premises and processes at least $5,000 per month in Credit/Debit transactions, you may be eligible for an advance of up to $350,000 per retail location!
Merchant advance programme takes your future cash flows and turns them into immediate cash that you can use for your business right away. The balance is paid off automatically through a portion of future debit/credit card sales, or through an automatic fixed daily payment in the event that your business does not accept much debit/credit. For more information, and to set up a discussion, please contact Terry Lynch
